Cboe Digital receives nod for margin trades on its crypto futures exchange

Cboe Digital, a major options exchange in the United States, has had its application to offer margined futures contracts for Bitcoin (BTC) and Ether (ETH) approved by the United States commodities regulator.

While Cboe has offered crypto futures contracts since December 2017, margin trades were not available to users.

With the new approval, users will be able to trade Bitcoin and Ether futures with a fraction of what they initially had to put upfront. 

The approval has also been seen as a positive step for Cboe as it will allow traditional financial firms access crypto futures without intermediaries having to take custody.

“That’s where the concept of us also having a spot market has advantages,” Cboe Digital President John Palmer said in a statement to Bloomberg. “We didn’t want to have to force participants to custody or touch the physical asset.”

The positive news comes at a pivotal time for the industry, as those in the U.S. market continue to face regulatory uncertainty from the U.S. Securities Exchange Commission.

Today the CFTC approved Cboe Clear Digital, LLC to clear margined digital asset futures. Learn more: https://t.co/tWLd2F7E2h

— CFTC (@CFTC) June 5, 2023

CFTC Commissioner Christy Goldsmith Romero has praised Cboe’s approach, and stressed that other crypto firms should follow Cboe’s lead and fit within the existing traditional markets structure first and foremost:

“Too often in recent years, crypto firms have sought to take a business model or market structure that exists in an unregulated environment and port it over to the regulated environment. The CFTC does not have a window into the risks associated with models or structures in an unregulated environment.”

“Cboe has not done that, instead operating within the parameters of the traditional futures market structure and regulatory framework,” she added.

The successful application stands in “stark contrast” to the application the CFTC reviewed from FTX prior to its bankruptcy, Goldsmith Romero said.

The commissioner explained that Cboe’s approval came after the regulator requested additional measures for “critical risk-mitigation” to lay out an approach to account for several “heightened risks” related to the digital asset market.

One of those measures included stricter cybersecurity practices, the commissioner noted.

Want to know more about the staff advisory from last week? Read here about how it is the 1st step in using existing authorities for supervision over heightened risk in expanding regulated crypto. W/that & cyber protections I requested, I support this regulated crypto expansion. https://t.co/KjRkGK3RyP

— Commissioner Christy Goldsmith Romero (@CFTCcgr) June 6, 2023

Related: CFTC proposes reducing anonymity to manage risks

Gabor Gurbacs, a strategy adviser for stablecoin issuer Tether and investment management firm VanEck, told his 56,400 Twitter followers on June 5 that the approval would likely be seen as a win for institutions, an investor class that Galaxy Digital CEO Mike Novogratz believes has contributed to the slow buying in recent months.

I worked with the OCC back in the days to get a margined model approved… the CFTC was waiting to see how the CME contracts end up functioning. Obviously they are working well… so looks like approvals are back on the table.

— Gabor Gurbacs (@gaborgurbacs) June 6, 2023

Cointelegraph reached out to Cboe for comment but did not receive an immediate response.

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